Please correct me if I'm wrong, especially those with more experience in international trade, I'm considering the following based on a recent experience:
I recently purchased some parts for my business from an international supplier who requested payment in USD rather than their local currency. I made the transfer through Suncorp Bank. The money was debited from my account, but it didn't reach the supplier for a month. When I contacted Suncorp to find out where the money was, they explained that since the payment was made in USD, it was routed through a U.S. bank as an intermediary before it could be sent to the supplier's bank.
Given this, and considering the current situation with the DRC defying the rulings of the ICC and the ICSID, a point comes to mind. Since the DRC has sold themselves to China and prefers payments in USD instead of their local currency, which has little value, large transactions will be routed through U.S. banks.
Which makes me wonder, under the New York Convention (1958) that mandates the enforcement of international arbitration awards, there could be a scenario where funds transferred in USD through U.S. banks could be held or intercepted until the DRC complies with ICC and ICSID rulings??
When a country does not follow the decisions or awards of the International Centre for Settlement of Investment Disputes (ICSID) and the International Chamber of Commerce (ICC), several consequences can arise:
1. International Centre for Settlement of Investment Disputes (ICSID):
- ICSID Arbitration Awards: When a country (usually a host state) does not comply with an ICSID arbitration award, it can lead to significant diplomatic and financial consequences.
- Enforcement and Recognition: Under the ICSID Convention, awards are binding and must be enforced as if they were a final judgment of a court in that country. A refusal to enforce could lead to loss of credibility and potential sanctions.
- Reputation and Credit Rating: Non-compliance may negatively affect the country’s international reputation, discourage foreign investment, and potentially harm its credit rating.
- Seizure of Assets: The winning party can pursue enforcement in jurisdictions where the non-compliant state has assets. This can lead to the seizure of state-owned assets abroad.
- Political and Economic Isolation: Continued non-compliance may result in strained diplomatic relations and can lead to economic isolation or loss of access to international financial markets.
2. International Chamber of Commerce (ICC):
- ICC Arbitration Awards: The ICC provides a private arbitration mechanism to resolve disputes, particularly between private parties or a private party and a state. Its awards are also binding.
- Enforcement under the New York Convention: If a country fails to comply with an ICC award, the winning party can seek enforcement in any country that is a signatory to the New York Convention (1958). This treaty obligates signatory countries to recognize and enforce foreign arbitral awards.
- Legal and Financial Costs: Non-compliance could lead to prolonged legal battles, increasing costs and potentially leading to interest accruals on unpaid amounts.
- Reputational Damage: Just like with ICSID, a country's or company's refusal to honor an ICC award can significantly tarnish its reputation, affecting future business and investment opportunities.
3. Wider Consequences:
- Chilling Effect on Investment: Both ICSID and ICC decisions are fundamental to maintaining a stable international investment environment. Non-compliance can deter potential investors who seek assurance of fair and enforceable dispute resolution mechanisms.
- Loss of Legal Protections and Treaty Benefits: For countries that repeatedly disregard arbitration awards, there might be a reconsideration of existing bilateral investment treaties (BITs) or multilateral agreements that provide legal protections and benefits.
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